Business Context and Reporting Period
This Form 8-K Current Report, filed by American Express Company on October 17, 2016, provides Regulation FD disclosure regarding credit performance statistics. The report covers the months ended July 31, August 31, and September 30, 2016, and the three-month period ended September 30, 2016. The data focuses on the U.S. Consumer Services (USCS) and U.S. Small Business operating segments, specifically detailing Card Member loans, delinquency rates, and write-off statistics.
Key Financial Metrics
The filing presents loan balances, delinquency percentages, and net write-off rates for principal only. Data is reported in billions of dollars unless otherwise noted.
| Metric | July 31, 2016 | August 31, 2016 | September 30, 2016 | 3 Months Ended Sept 30, 2016 |
|---|---|---|---|---|
| USCS Total Loans ($B) | 44.8 | 45.0 | 44.9 | 44.9 |
| USCS 30+ Days Past Due (%) | 1.1% | 1.1% | 1.1% | 1.1% |
| USCS Net Write-off Rate (%) | 1.6% | 1.6% | 1.6% | 1.6% |
| U.S. Small Business Total Loans ($B) | 8.7 | 8.8 | 9.0 | 9.0 |
| U.S. Small Business 30+ Days Past Due (%) | 1.1% | 1.1% | 1.1% | 1.1% |
| U.S. Small Business Net Write-off Rate (%) | 1.5% | 1.6% | 1.6% | 1.5% |
| Total U.S. Consumer & Small Business Loans ($B) | 53.5 | 53.8 | 53.9 | 53.9 |
American Express Credit Account Master Trust (Lending Trust) Metrics:
- Ending Principal Balance (Sept 30, 2016): $24.1 billion
- Annualized Default Rate (Sept 2016): 1.0%
- Total 30+ Days Delinquent (Sept 2016): $0.2 billion
Material Changes and Adjustments
The reported statistics reflect the impact of reclassifying certain Card Member loans from "held for sale" to "held for investment" on the Consolidated Balance Sheets. The amounts reclassified were $214 million (July), $184 million (August), and $160 million (September).
Non-GAAP Adjusted Metrics (Excluding Reclassified Loans):
- Adjusted 30+ Days Past Due (Sept 30, 2016): 1.0% for both USCS and U.S. Small Business.
- Adjusted Net Write-off Rate (Sept 30, 2016): 1.4% for USCS and 1.3% for U.S. Small Business.
Overall, reported delinquency and write-off rates remained stable across the three-month period for both segments.
Management Commentary and Risks
The filing notes that the credit performance of the Lending Trust may differ month-to-month from the USCS and U.S. Small Business statistics due to several factors:
- Differences in loan mix, vintage, and aging.
- Performance of loans acquired by the Lending Trust on June 1, 2016 (none were past due at acquisition).
- Calculation mechanics: The Lending Trust uses end-of-period principal balances, whereas USCS and Small Business statistics use average loan balances over the reporting period.
- Impact of additions to the Lending Trust within a specific period.
The filing does not provide forward-looking guidance, revenue projections, or liquidity metrics beyond the credit statistics presented.
Investor Verification Checklist
- Verify the distinction between GAAP reported rates and the non-GAAP adjusted rates excluding reclassified loans.
- Review the attached Exhibit 99.1 for historical trends in the HFS Portfolios (Costco and JetBlue cobrand partnerships).
- Compare the Lending Trust's default rates (1.0%) against the operating segment write-off rates (1.5% - 1.6%) to understand portfolio segmentation risks.
- Confirm the impact of the June 1, 2016 loan acquisition on the Lending Trust's performance metrics.